December 21, 2014

There’s at least one bipartisan piece of legislation moving
through Michigan’s lame-duck session: A streamlined loan program for
residential customers looking to install renewable energy or efficiency systems
on their property.

The Municipal
Utility Residential Clean Energy Program Act is modeled after the
state’s Property Assessed Clean Energy financing law of 2010, bringing to
homeowners a similar loan program that until now has only been available to
commercial and industrial property owners.

However, the law would apply only to residential
customers of municipal utilities — about 260,000 households, according to the
Michigan Municipal Utility Association. The law would apply to residents
in cities such as Lansing and Traverse City after local governing board
approval.

“It gets down to the fact that energy efficiency is common
sense: It reduces energy waste and saves money,” said Jack Schmitt, deputy
director of the Michigan League of Conservation Voters. “This legislation
allows for and promotes greater opportunities for energy efficiency throughout
Michigan.”

The legislation has strong support in Holland, population
33,500, which is served by the Holland Board of Public Works. It is also the
home district of the bill’s sponsor, Republican Joe Haveman.

Holland’s Home Energy Retrofit Task Force predicts it will
be easy for residents to acquire loans because debt is tied to the property.

“The ability to borrow the capital needed for deep energy
retrofits would ideally end up saving more funds in monthly energy efficiencies
than the monthly debt repayments required,” Holland City Manager Ryan Cotton told
the task force.

The bill would help Holland in its community energy plan,
which aims to cut energy use 50 percent by 2050. The city will likely serve as
a test site for other municipalities, said Jim Weeks, president of the
Municipal Utility Association.

“If it is a model that in the end does what we think it will
— which is empower homeowners to make investments in saving energy they
otherwise wouldn’t make — others would follow suit,” Weeks said.

A municipality’s governing body would first need to approve
a clean energy district. Home energy audits are also tied to the legislation,
helping property owners determine the most cost-effective upgrades. Loans would
be available through a trust set up by the municipality and could include the
utility, nonprofits or commercial lenders. If the economics work, loans could
also go toward renewable energy systems.

The bill received near-unanimous support (108-2) in the
state House in June and unanimously cleared a Senate committee earlier this
month. Supporters expect it to pass the full Senate before the end of December.
The governor’s office is listed as one of 13 formal supporters.

The Michigan Conservative Energy Forum, a group supporting
“conservative solutions to Michigan’s Energy Future,” submitted
testimony in September that the bill “addresses a significant
shortfall” in the 2010 PACE law by including residential customers.

Larry J. Ward, the Conservative Energy Forum’s executive director,
wrote to a Senate committee that the bill is a “truly market-driven approach to
expanding energy efficiency programs by utilizing a funding system that
includes private institutions.”

Ward also wrote that it’s a “creative energy solution that
invokes some of the conservative principles that the Michigan Conservative
Energy Forum espouses: Local Control, Community Involvement, and, most
importantly, a Voluntary system that works for the community and residential
customer.”

Ward also credits the bill for addressing the “split
incentive” issue for residential property landlords. “Through the
‘on-bill financing’ provision of the bill, HB 5397 would allow for Energy
Efficiency incentives where both the Landlord and the Tenant would benefit from
home improvements.”

The “on-bill” financing aspect of the law allows customers
to pay back the loan through savings on their electric bill. A House
Fiscal Agency analysis says that about 20 other states allow for on-bill
financing.

While Schmitt said there are always opportunities for
homeowners to get loans from banks through home equity, “This is such an
important program because it allows you to work directly with your provider of
electricity. … The intent is to make it as easy and streamlined as possible.”

The Michigan Environmental Council called
it “good, common-sense policy that would help homeowners get over the
upfront investment needed for long-term energy savings, which can be a
significant barrier for some.”

PACE-like financing for residential properties hit a
stumbling block in 2010 when the Federal Housing Finance Agency said that loans
on such properties created risk for those in the mortgage industry. The
programs have since rebounded, and two years ago the Brookings Institution issued
a report urging Congress to enact laws facilitating its
growth.

State efficiency program saving millions of dollars

Meanwhile, the Michigan Public Service Commission reported
late last month that the state’s energy efficiency program for utilities is
exceeding targets established under the 2008 renewable energy law.

The
report showed that each dollar spent by electric and natural gas
customers under a utility’s efficiency program results in $3.75 worth of
savings by eliminating waste. The report is issued annually, and for 2013,
savings totaled 1.3 million MWh of electricity, or roughly 121,000 households’
annual electric usage.

Statewide, $253 million was spent on the Energy Optimization
program, which will result in savings of $948 million over the lifetime of the
installations. Electric utilities hit 132 percent of the savings target last
year, while natural gas utilities hit 121 percent.

“Once again, Michigan’s energy optimization programs have
proven their worth to utility customers large and small,” MPSC Chairman John
Quackenbush said in a statement.

Michigan’s energy
efficiency program was established under Public Act 295 of 2008
and requires utilities to design programs to save customers money. The programs
are meant to defer or reduce the need for new generation plants, “the cost of
which is allocated to all customers, whether or not they have participated in
the EO program,” the report says.